Discussion of a Centrist Health Care Plan

The Republican and Progressive views on the future of health care are clear. Republicans want to repeal the ACA and move us towards a system with fewer regulations. The Trump Administration has taken us towards this goal by ending the individual mandate, ending reinsurance subsidies, and legalizing bare-bones health plans.

The Progressives want either a single-payer system or a Medicare-for-all option. Republicans are attacking Democrats for their support of the single-payer option. Some of these attacks may stick because centrist Democrats have not put forward a clear centrist plan that improves health insurance and health care.

A Centrist Health Care Plan is the topic and name of my new paper, available at SSRN

The proposals discussed here include – (1) new incentives to encourage continuous health insurance coverage, (2) alterations to rules governing health savings accounts and high deductible health plans, (3) rule changes leading to reduced reliance on employer-based insurance, and (4) government subsidies for certain expensive health care cases, which are not easily treated by narrow-network HMOs.

The ACA was a good first step towards expanding and improving health insurance coverage. Republicans failed to totally repeal the ACA but under Trump the nation is moving backwards. The individual mandate and reinsurance subsidies have been eliminated and new bare-bone insurance policies undermine comprehensive insurance.

The individual mandate as previously structured was unpopular. It could be replaced with a tax credit exclusively for people with comprehensive health insurance.

The new temporary bare-bone insurance plans can be eliminated by executive order.

Many health care problems were not affected by the ACA. The trend towards higher deductibles and larger out-of-pocket expenses was accelerated by the introduction of health savings accounts coupled with high-deductible health plans. Many Americans now actively debate whether they should reduce contributions to 401(k) plans to maintain contributions to health savings accounts. Other Americans actively consider foregoing needed prescription drug regimens so they will have funds for their retirement.

Financial instability and health problems caused by the increased use of health savings accounts coupled with high-deductible health plans can be reduced by a new tax credit and by more flexible rules governing contributions to health savings accounts.

Issues caused by narrow-network health plans, which do not allow access to top doctors and hospitals predate the ACA. Narrow-network health plans provide great health care for the vast majority of health care conditions. However, access to certain specialists for certain diseases like cancer is often limited. This issue can be called the breaking bad problem after the fictional chemistry teacher who manufactures and sells meth to fund his cancer treatment.

The Republicans maintain reinsurance or risk-adjustment payments are subsidies to insurance companies, a form of corporate welfare that must be eliminated. Under the Centrist proposal, the government subsidy for expensive health care procedures would be sent directly to the out-of-network provider on behalf of the patient. These subsidies would allow the narrow-network health plan to contract out complex procedures, concentrate on basic health care problems and maintain low premiums.

The ACA attempted to create a viable individual health insurance market by changing rules governing coverage for pre-existing conditions and underwriting of health insurance premiums. However, ACA rules still substantially favor employer-based health insurance over the new state exchange market places. A centrist Health plan would cautiously reconsider these rules to strengthen the nascent state exchange market places.

The new subsidies for contributions to health savings accounts and expensive health care cases are partially paid for by reductions in tax expenditures on ACA and employer-based insurance.